10 companies that are great at avoiding taxes

U.S. multinational companies sidestep a whopping $90 billion in federal income tax annually, according to a study released this month by the Citizens for Tax Justice and the U.S. Public Interest Research Group. Some companies are so successful at skirting taxes that they end up making money from the government: 26 of the 288 profitable companies examined paid a negative tax rate over the five-year period from 2008 to 2012.

While this may sound bad, these corporations are usually just taking advantage of tax loopholes in a completely legal manner. And many people say that those tax savings may help boost the economy, as corporations use that saved money to expand their companies and hire new workers. But others think that letting corporations off the hook when it comes to taxes may hurt the average American, as those tax dollars could be used to fund everything from infrastructure to education to health care. And some people go even further than that: “Any tax these companies don’t pay is tax revenue the rest of us have to make up,” says Gardner. “Lower taxes on big multinationals inevitably mean higher taxes on middle-income families and small businesses.”

But good or bad, corporate tax dodging likely isn’t going anywhere anytime soon. Here are 10 companies that have gotten their tax rates well below zero (the full list is here on page 41) – meaning that, over a five-year period, they ended up getting a tax refund from the government, CTJ estimates.

— By Catey Hill

Slide 2 of 12

Pepco Holdings

Tax rate: -33%

Pepco Holdings, which sells power to roughly two million people in Delaware, Washington, D.C., Maryland and New Jersey, earned more than $1.7 billion in profit over a five-year period. But the company’s tax rate was -33% (the lowest of all the 288 profitable companies examined) and over five years it earned tax returns totaling $575 million. Gardner says that utility companies tend to “rely heavily on accelerated depreciation” to lower their effective tax rates. Pepco says that they pay all taxes they owe in accordance with the law and that “tax benefits create new investment opportunities and jobs, and the tax savings get passed to our customers in the form of lower rates.”

Slide 3 of 12

PG&E Corp.

Tax rate: -16.7%

San-Francisco-based utility company Pacific Gas and Electric Company
PCG, +0.63%
, which serves about 15 million Californians, rakes in loads of profits: In the past five years alone, it has netted more than $7 billion. But it paid a tax rate of -16.7% and got returns of more than $1.17 billion. This is well below the U.S. average for utility, gas and electric companies, which tend to have an effective tax rate of 2.9%. Like Pepco, PG&E Corp. uses extensive asset depreciation to lower its tax rate, the report revealed. A spokesperson for the company says: PG&E did just what Congress intended: we spent billions of dollars on job-creating investments in California infrastructure. Our customers have benefited from the resulting tax savings as well.

Slide 4 of 12

NiSource

Tax rate: -13.6%

Energy company NiSource
NI, +1.99%
pays a net effective tax rate of -13.6% and over a five-year period got more than $336 million in tax refunds. Meanwhile, the company pulled in nearly $2.5 billion in profits. NiSource used the domestic production activities deduction — which gives a tax break to some companies that do manufacturing in this country — to cut its tax rate, the report revealed. NiSource notes that since 2008, it has invested more than $7.5 billion in capital expenditures to support energy infrastructure projects that helped spur local spending and job creation and that this year is on pace to invest more than $2.2 billion on similar projects.

Slide 5 of 12

Wisconsin Energy

Tax rate: -13.5%

Wisconsin Energy
WEC, +0.47%
provides electric and natural gas service to customers in Wisconsin and Michigan — and that’s proved to be highly profitable for the company. From 2008 to 2012, they’ve made $3.2 billion in profit, though their net effective tax rate is -13.5%. They’ve also gotten more than $435 million in tax refunds. Wisconsin Energy notes that because Wisconsin Energy and other electric and natural gas utilities are allowed, by law, to claim accelerated depreciation on capital investments, half of the 26 companies on the list were in the utility industry. It also says that “the vast majority of the tax benefits permitted under the country’s tax laws have already been passed on to our customers and used to significantly lower their utility rates over the period of this report.”

Slide 6 of 12

General Electric

Tax rate: -11.1%

GE
GE, -0.08%
brought in more than $27 billion in profit over the five-year period from 2008 to 2012, but the company got $3 billion in tax refunds and its effective federal tax rate was -11.1%. “GE relies on the active financing loophole to cut its U.S. taxes,” says Gardner. “For each year cited by Citizens for Tax Justice, GE paid income taxes in the U.S., as well as billions in other state, local and federal taxes in the U.S. CTJ inaccurately uses the current tax provision — a book accounting number — to make definitive statements about our U.S. income taxes,” a GE spokesperson says. “This is not the same as the cash income tax that we pay for a given year.”.

Slide 7 of 12

Tenet Healthcare

Tax rate: -6%

This health care company received $51 million in tax refunds from 2008 to 2012 and paid a net rate of — 6%; this is significantly below the 29.6% rate that health care companies tend to average. Meanwhile, profits were $854 million. “Deferral explains the company’s low tax rates in 2011 and 2012,” the report reveals. Tenet
THC, -0.58%
has not yet responded to a request for comment.

Slide 8 of 12

American Electric Power

Tax rate: -5.8%

This 100+ year-old electric utility company
AEP, +0.44%
, headquartered in Columbus, Ohio, still has plenty of spark: Not only does it serve about 5 million consumers, it raked in more than $10 billion in profits over five years, while only paying a net tax rate of -5.8%. It got $577 million returned to it. “Deferred taxes, driven primarily by accelerated depreciation, explain most of the company’s low rates in all five years,” according to the report. The company notes that it is “among the many companies that participated in short-term tax policies developed by Congress and the Obama administration to encourage corporations to spend money to create jobs and boost the economy” and that “in the three-year period before the spending incentives were in place, AEP paid more than $1.1 billion in federal income taxes and $61 million in state income taxes.”

Slide 9 of 12

Priceline.com

Tax rate: -3%

The Priceline Group
PCLN, +1.76%
, which includes Priceline.com, seems to have taken its own advice, and named its own price — well, at least when it comes to taxes. The organization, which made $557 million in profits over a five-year period from 2008 to 2012, had a net effective tax rate of -3% and got refunds worth nearly $17 million. “Excess tax benefits from stock options reduced federal and state taxes by $5.2, $21.0, $3.1, $2.1 and $7.0 million in 2012, 2011, 2010, 2009 and 2008,” the report revealed. The Priceline Group declined to comment.

Slide 10 of 12

Verizon Communications

Tax rate: -1.8%

Of the 26 companies that paid negative tax rates, Internet and phone company Verizon
VZ, +0.26%
raked in the largest profit (more than $30 billion over a five-year period), even though it paid an effective tax rate of -1.8% — that’s compared with an industry average of 22.4% for Internet companies and 9.8% for telecommunications companies — and got a total tax return of $535 million. “ A Verizon spokesperson suggests that the CTJ report “grossly overstates our profits over the five-year period by including pretax income that is attributable to Vodafone” and notes that “tax-policy-reform agendas like CTJ often cherry pick disclosures from the company’s SEC filings” which “distorts the facts and misrepresents Verizon’s commitment to paying its fair share in taxes.”

Slide 11 of 12

Boeing

Tax rate: -1%

Aerospace and defense company Boeing
BA, +0.81%
fuels its bottom line with fat tax refunds from Uncle Sam: From 2008 to 2012, the government paid Boeing $202 million, despite the fact that it saw profits of $20 billion. Its net effective five-year tax rate was -1%; that’s compared with an industry average of 16.7%. Boeing notes that its current tax expense has been reduced somewhat in recent years by the very large investment it has have made in jobs and production facilities for its new airplanes, which are taxes that largely are deferred until they begin to deliver the 787 jet (and get the revenue back from their investment) in high volume at steady rates.

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